Introduction
Does Foreign Direct Investment (FDI) lead to development? This has been one of the central questions of discussions in most of academia. The involvement of FDI in developing economies is one of the signs of globalization. There have been a considerable amount of money transferred from developed to poorer countries. Foreign investment can be observed in form of capital inflow and technology transfer. This paper tries to explore the nature of FDI and then discuss its effect on the recipient country. FDI helps host country develop its economy through mainly three factors: technological spillovers, linkage effects and competition effects. Thus, some people believe that FDI is one of the important factors that is necessary for economic development. On the other hand, this paper discusses the importance of the host government in terms of adequate policies. In order to get the maximum benefit from the presence of Multinational Corporations (MNC’s), the host country should have a certain level of general public education and it has to open its market for foreign investors, eliminating discriminatory policies. These and other related factors help boost efficiency of FDI in the development of the host economy. The paper also brings South Korean development as a case study to show whether FDI has been necessary or not. Even though FDI has positive effects on the host economy, it is not crucial in the development of the host country with the governmental policies of the recipient state being the key factor that leads to development.
Nature of FDI
In order to have a better understanding of FDI and its effect on the economic growth of the host country, this paper provides a background information about the determinants and types o...
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...d be assessed in a specific way to understand the efficiency of foreign investment.
Works Cited
1. José De Gregorio, “The Role of Foreign Direct Investment and Natural Resources in Economic Development”, Central Bank of Chile Working Papers, No. 196, 2003, http://www.bcentral.cl/estudios/documentos-trabajo/pdf/dtbc196.pdf
2. Kjetil Bjorvatn, Hans Jarle Kind and Hildegunn Kyvik Nordås, “The Role of FDI in Economic Development”, Nordic Journal of Political Economy, Vol. 28, 2002, p. 109-126, http://www.nopecjournal.org/NOPEC_2002_a08.pdf
3. “Foreign Direct Investment for Development”, OECD PUBLICATIONS, No. 81839, 2002, http://www.oecd.org/investment/investmentfordevelopment/1959815.pdf
4. Laura Alfaro, “Foreign Direct Investment and Growth: Does the Sector Matter?”, Harvard Business School, April 2003, http://www.grips.ac.jp/teacher/oono/hp/docu01/paper14.pdf
To begin with, this research exposed a FDI puzzle between India and China through analyzing the current economic condition. Prime, Subrahmanyam and Lin (2011) stated, "Given their growth records, large markets, and reformed economic systems, both China and India appear to be equally likely candidates for foreign direct investment. Yet, China has received substantially more FDI" (p. 303).
C/E/110. FDI in emerging economies: the case of EECThe paper discusses the importance of inbound FDI for emerging economies. Among the considered benefits are economic growth, the growth of internal market, technological sipll -overs and access to cheap managerial know-how. The paper also considers the motivational forces that push and pull investors to stream their capitals into particular destinations and business areas.
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Since foreign aid programs are here to stay, it is important to focus on the enormous potential for foreign aid to be effective. One such way is through augmenting a state’s ability to attract foreign direct investment (FDI). FDI is a good option because it has the potential to be a more long-term solution than pub...
After the financial crisis of 2008 there has been a dramatic decrease of foreign direct investment (FDI) around the world. Particularly the rapid decline in inflows has affected the recovery speed of FDI around the world. Inflows into Europe contracted by 42% and to North America by 21%, inflows to Australia and New Zealand together declined by 14% 1. However there are few exceptions to the trend, such as the United Kingdom who have managed to keep its FDI attraction. UNCTAD has confirmed that FDI inflows into the UK have risen by 22% 2 over the past year.
We all know that the foreign investment is a necessary part of global expansion. Many developed countries prefer to invest developing countries. For instance, the US has invested much more fund in China. Since the initiation of its market reforms in the 1980’s. China has been a preeminent recipient of foreign direct investment (FDI). Until 2011, there is over $1.2 trillion have been invest in China as foreign direct investment, it made Chinese industries has been transformation, and contributed enormously to the nation’s industrial output. In addition, the more foreign manufactures, the more Chinese subsidiaries have dominated (Wei, Xiao & Yuan, 2014).
In conclusion, Ireland is favorable country for FDI regarding its markets, resources, knowledge, efficiency, security and foreign trade opportunities. Further, from the country’s attractiveness that integrated with its PESTEL proved that the benefits and control for foreign companies were able to overcome the risks and costs that they have to bear with. The fact that Ireland was also dragged by global economic recession in 2008 had drawn the country’s GDP and economy condition (The World Factbook, 2009). However, the country’s supports due to foreign investment and government commitment in its political-economy regulations are trusted to sustain Ireland in long-term performance.
Furthermore, the relative importance of FDI determinants may change over time, for instance due to globalization. Factors that have been brought out as determinants of FDI in developing countries include political and macroeconomic stability, infrastructure quality, governance, regulatory environment openness to trade and investment promotion strategies (UNCTAD, 1998). However, it is important to note that even though these factors have been empirically proven to be FDI determinants, some determinants may apply to some regions but not others. For instance, on average, countries in Sub-Sahara Africa (SSA) receive less FDI than other regions by virtue of their geographical location (Asiedu, 2002). However, it is important to note that even when factors apply to a particular region, they may not be applicable to a specific country within that
The main concept discussed in this essay is foreign direct investment. FDI is, according to the OECD, “a category of cross-border investment made by a resident entity in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor.” Firms invest in foreign economies in order to exploit their particular advantages and FDI is the preferred process, as opposed to licensing or agreements and exports. The advantages that firms often possess are patented technology, managerial skills, marketing skills and brand names.
Figure 1 shows the recent trends in FDI inflows of some developing countries. According to the UNCTAD report of 2011 China has the highest FDI inflows among all the developing countries like Hong Kong, Russia, Singapore, Brazil and India; because China has introduced FDI over 20 years ago and has progressively pursued foreign investment while adjusting its FDI policies. Since 1993, China has attracted the largest amount of FDI of all developing countries while increasing its levels of both exports and technological advancement
FDI is typically regarded as a mode of cross-border inter-firm collaboration which connects with important equity stake and efficient power in managerial decision making in international enterprises (de Mello, 1999). FDI is also an external factor which boost Thailand’s economic growth through employment, transfer of technology and knowledge and relocating manufacturing facility. However, there is increasingly movement of production base into China and India instead of Thailand. As a result, the Thai
Can we then say that this theory is valid in the Nigerian case? If yes, to what extent? Is there any significant relationship between FDI, domestic investment and the economic growth and development of the economy? If there is, what is the nature of the relationship?
FDI inflow is divided into four (4) main sectors: agriculture, industries, infrastructure and tourism. FDI in the agricultural sector amounted to US $ 794.5 million in 2011, US $ 556.6 million in 2012 and a sharp increase of US $ 1,128.8 million in 2013. However, it started to decline of US $ 264.7 million in 2014 and US $ 482.6 million FDI flows in the infrastructure sector, which amounted for US $ 3,129.8 million in 2015 compared to the industrial sector, amounted for US $ 919.3 million and the tourism sector represents only US $ 111.9 million in
In the previous section of our paper, we have shown how there is a redirection of FDI inflow to India from China. This FDI is taken in this model as capital investment(increase in capital for India and an equal decrease of capital from China). The following table shows the data of labor force and capital investment in terms of machinery and other
Sukar, A., Ahmed, S., & Hassan, S. (n.d.). THE EFFECTS OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH. Southwestern Economic Review.